Dive Brief:

• When hiring managers give jobs to candidates referred by powerful higher-ups, harsh moral issues are raised, according to a new study from the University of Maryland's Robert H. Smith School of Business. Results from the study show that although internal referrals can bring candidates onboard who are a good fit for a company, referrers' reputations can be jeopardized, so they must find ways to try to guarantee the candidates' success through monitoring, mentoring or training. Study results find that candidates also are under pressure, because they want to perform well so they don't embarrass their referrers.
• Referral practices can be seen as morally questionable territory in which favoritism and special interests are placed above merit in filling a job, said the study's authors. This is especially true in the case of internal referrals, they added, whereby hiring managers appear unethical and self-serving by making referrers dependent on them for their own personal gain.
• The authors point out that half of all new hires are internal referrals and that HR managers encourage the practice. Although the authors examined the moral and ethical issues internal referrals raise, they don't advocate ending the practice. However, they do recommend making internal referrals anonymous as one way of keeping highly influential referrers from appearing to sway the recruiting and hiring process.

Dive Insight:

Referrals remain a key strategy for finding and hiring talent and the benefits might outweigh the disadvantages. SilkRoad, a global talent activation firm, released a 2017 report showing that referrals made up 30% of new hires, and internal referrals accounted for even more — 45%. Referrals can be an invaluable talent pool for employers struggling to find qualified candidates in a tight labor market.

When referrers have a relationship with potential hires and vouch for their character, some of the vetting recruiters normally do with job candidates is already done. And since company culture is among the top reasons employees give for leaving a job, recruiters rely on referrers' judgment to recommend only candidates that they think will fit in.

Keeping referrers anonymous, like the study suggests, might remove pressure from both hiring managers and candidates. HR leaders can remind managers of the consequences of real and perceived unfairness and encourage transparency about hiring decisions.